uploads/2016/01/Percentage-revenue-streams21.jpg

Netflix’s Programming Deal with CW Network

By

Updated

Netflix’s deal with CW

On January 19, 2016, Netflix (NFLX) stated in an interview with Benjamin Swinburne from Morgan Stanley (MS) and Peter Kafka from Re/code that the company is in the midst of negotiations with the CW Network regarding its programming deal with the network. CW is jointly owned by CBS (CBS) and Time Warner’s (TWX) Warner Bros. Netflix’s programming deal with CW is close to expiration.

Netflix stated that it would “like to make that deal work, it’s great programming, we have a great relationship with CBS and Warner Brothers on that deal and we’d like to continue it.”

Article continues below advertisement

Netflix has streaming rights to past seasons of CW television shows including Jane the Virgin, Vampire DiariesArrow, and The Flash. On the other hand, Hulu offers current seasons of television shows from the CW. Hulu is jointly owned by Comcast’s (CMCSA) NBCUniversal, The Walt Disney Company (DIS), and 21st Century Fox (FOXA).

A report on Bloomberg dated January 12, 2016, also stated that the CW is planning to launch its paid streaming service shortly, according to unnamed sources.

According to another Wall Street Journal report, which cites a September 2014 Macquarie Capital report, the majority of revenue for a media company producing a television show in the United States comes from international licensing. As the chart above indicates, this figure is 41%. At around 34%, the second-largest source of revenue for a media company is licensing content to broadcast networks in the United States.

Netflix believes content will be sold to the highest bidder

At a UBS (UBS) Conference in December 2015, Netflix acknowledged that there had been a fundamental shift in viewer preferences from linear networks to SVOD (subscription video on demand) platforms. Media companies are becoming reluctant to license content to SVOD platforms such as Netflix.

However, Netflix believes that it came into the market as the first and major SVOD player, distinguishing itself from traditional pay-TV companies. With another major player entering the content-licensing market, media companies have been able to raise the prices of content and sell this content to the highest bidder. In this way, Netflix’s entry has proved to be beneficial for media companies in the long run.

Netflix makes up 0.97% of the PowerShares QQQ Trust Series 1 ETF (QQQ). If you’re interested in exposure to the television and radio sector, QQQ has 4.4% exposure to that space.

Advertisement

More From Market Realist